I am curious in exploring the relationship to how an increase in general taxes might lead to an increase in the cost of consumer prices. I'm specifically interested in the general payroll tax and perhaps how removing the Bush tax cuts may affect consumer prices.

My thought is that an increase in taxes on businesses will be reflected to consumers in the form of higher prices. I'm hoping to find some literature that explores the existence and strength of this connection and some examples, or a succinct argument that states there is none.

One of the most fundamental questions in public finance is who bears the burden of taxes -- the incidence of taxation. Our understanding of incidence from an empirical standpoint is quite meager. Indeed, there seems to be little evidence even in the case that is theoretically the easiest -- partial equilibrium commodity taxes. Are taxes levied on commodities completely shifted into their prices, or does the incidence also fall on firms? How long does the shifting process take? In this paper we employ a unique data source to examine the incidence of sales taxes. The main idea is to take information on the prices of specific commodities in different U.S. cities and to examine the extent to which differences in tax rates and bases are reflected in prices, controlling for other factors (such as costs). We find a surprising variety of shifting patterns. For some commodities, the after-tax price increases by exactly the amount of the tax, a result consistent with the standard competitive model. However, taxes on other commodities are overshifted -- an increase in tax revenue of one dollar per unit increases the price by more than one dollar.

Since you are in /r/austrian_economics I must point out to you the most important contribution of AE and that is to look at effects of a policy not only in one time frame but across multiple time frames and not just on one group but on all groups.

If you were to just analyze the effect of tax increases on consumer goods prices, you may or may not find enough data to conclude your assumption, you might even see an inverse effect than what you expected.

But on the other hand if you were to look at things across multiple time frames, then you will realize that tax increases actually reduce the total capital goods available for future generations and therefore makes us less richer in future. With less profits pouring in, the companies are able to lengthen their structure of production less. And this results in reduced future prosperity.

That's an interesting perspective and one that I would be more interested in exploring. I guess I was hoping for something a bit more forceful that I could keep in my back pocket if I get into an argument. But I suppose it's like investing in general--if there was a clear and known formula then we'd all follow it to great wealth.

Taxation always has a two-fold effect: (1) it distorts the allocation of resources in the society, so that consumers can no longer most efficiently satisfy their wants; and (2) for the first time, it severs “distribution” from production. It brings the “problem of distribution” into being.

One of the oldest problems connected with taxation is: Who pays the tax? It would seem that the answer is clear-cut, since the government knows on whom it levies a tax. The problem, however, is not who pays the tax immediately, but who pays it in the long run, i.e., whether or not the tax can be “shifted” from the immediate taxpayer to somebody else. Shifting occurs if the immediate taxpayer is able to raise his selling price to cover the tax, thus “shifting” the tax to the buyer, or if he is able to lower the buying price of something he buys, thus “shifting” the tax to some other seller.

The first law of incidence can be laid down immediately, and it is a rather radical one: No tax can be shifted forward. In other words, no tax can be shifted from seller to buyer and on to the ultimate consumer. Below, we shall see how this applies specifically to excise and sales taxes, which are commonly thought to be shifted forward. It is generally considered that any tax on production or sales increases the cost of production and therefore is passed on as an increase in price to the consumer. Prices, however, are never determined by costs of production, but rather the reverse is true. The price of a good is determined by its total stock in existence [its supply] and the demand schedule for it on the market [demand for it]. But the demand schedule is not affected at all by the tax. The selling price is set by any firm at the maximum net revenue point, and any higher price, given the demand schedule, will simply decrease net revenue. A tax, therefore, cannot be passed on to the consumer.

It is true that a tax can be shifted forward, in a sense, if the tax causes the supply of the good to decrease, and therefore the price to rise on the market. This can hardly be called shifting per se, however, for shifting implies that the tax is passed on with little or no trouble to the producer. If some producers must go out of business in order for the tax to be “shifted,” it is hardly shifting in the proper sense but should be placed in the category of other effects of taxation.

Emphasis added

I highly recommend reading the rest of that section (search for the last sentence of the quote above and you'll find it immediately), because Rothbard goes on to use sales tax, partial excise tax, and income tax to illustrate the theory that taxes do not shift prices higher.

Before reading it myself, I was of a similar opinion (i.e. that taxes are shifted to consumers). (I found the quote only a month or two ago) It was conservatives and minarchist libertarians from whom I had heard the argument that the cost of taxes are shifted directly from producers to consumers without affecting production; their conclusion was that taxes should be lowered or at least not raised. The conclusion in isolation is fine, but it is faulty logic that is used to arrive at it.